(As prepared for delivery)
"American Family Goes Digital"
It is a pleasure to be with you again this year. The Western Cable Show is one of my favorite industry meetings. I especially enjoy the new technology demonstrations on the floor ---and commend them to you.
Being here in Los Angeles, I'm reminded of the Tim Robbins film, "The Player," in which we get a glimpse into the world of the Hollywood producer. The protagonist, played by Robbins, hears countless pitches every day from people who want their stories turned into a movie.
So, here's my pitch: A typical American family decides to buy a new digital TV set. The kids have stashed their allowances for a year. Mom and Dad have worked overtime to save up. They all go out and buy their 16 x 9 aspect ratio top- quality, cable-ready television set, bring it home, plug it into their cable system and turn it on.
Into their living room pours exquisite programming -- nature shows and feature films in high definition, interactive educational shows and data applications. And the family lives happily ever after.
Well, Roger Ebert, who will moderate the upcoming panel called "Hollywood Goes Digital," probably wouldn't give my story "a thumbs up." But I think he would like it a lot better than the horror-film version, in which the family brings home the new set, turns it on, and sees nothing but a blank screen.
How do we avoid the horror story? Obviously, we need to make sure that the technical issues are resolved so consumers can plug their digital sets into cable, and receive a proper signal. I know Dick Green at Cable Labs and many others here have been working hard toward that end.
But in addition to technical compatibility, we need to have compelling content --- content that is a catalyst for conversion to digital. That's why "Hollywood Goes Digital" is so important.
And before digital content can flow, Hollywood needs assurance that its rights to that content are reasonably protected -- just as they are in an analog world.
So, how do we achieve an appropriate balance between the content community's need for copy protection and consumers' desire for digital content? How do we ensure compatibility between consumer electronics equipment and cable systems?
Consumers don't really know or care much about the technology that brings them their news, information and entertainment. They don't understand the complexities of copy protection. The bottom line is that a digital television set --- or for that matter a DBS dish, or an advanced cable set top box --- will not be valuable to consumers unless it makes first rate digital programming and services available when they want it --- hassle-free.
And my job is to make sure that the digital revolution works for the American consumer for a "happily ever after" ending.
Digital Platforms Abound
Hollywood is going digital because everyone else is going digital.
It will take compelling content to drive the transition to digital. We are making progress but we could be doing even better.
To get there, we need to see cooperation across many industries to address the obstacles that remain.
One of the obstacles preventing the free-flow of digital programming is copy protection. Given the ease with which digital information can be replicated, the perfect quality of every digital copy, and the limitless distribution potential of the Internet, content producers understandably are concerned about placing their works on a cable system or broadcast network without adequate protections in place.
The marketplace tells us that production of video product depends upon the ability to amortize its cost -- not just over first-run in theaters, but also on pay per view, cable networks, broadcast channels, home video players and international distribution.
But if a first-run digital product immediately can be captured off air or off cable and replicated like a master copy or webcast globally -- without payment to the copyright holders, producers are going to be reluctant to release their product. I am committed to seeing a technological and legal environment in which Hollywood and the content community reasonably know that their product will retain its value and not be pirated.
But the family I described in my "pitch" wants to be able to view the programming of their choice regardless of what kind of electronics they own. If they want to "time shift" programming -- to record a show and view it later, to be able to record a pay-per-view movie and watch it later -- they should be able to do so. The Supreme Court has said as much and consumers have come to expect it.
The FCC thankfully -- does not oversee administration of the copyright laws. (It is comforting that not all hot potatoes fall into our lap!). But if we are going to see widespread availability of quality programming, the copy protection issues must be resolved.
To this end, we have tried to let market forces drive the outcome. We have encouraged private negotiations between content providers and distribution providers to hammer out the terms under which the content community will make its wares available. Some progress has been made. The parties generally have agreed to an encryption standard.
But we're not there yet.
Getting back to the American family that would like to view new digital programming and be able to record it for later use -- we need to see the negotiations quickly brought to a close so that consumers may benefit. The process is taking too long. The American public deserves resolution of these issues now.
Commercial Availability of Navigation Devices
Related to the issue of copy protection are the issues of commercial availability of navigation devices and "cable ready" receiver designations. Copy protection will only work if all of the network equipment, consumer equipment and software enable it.
As you probably know, FCC rules require that set top boxes with separate security modules must be commercially available by July of next year.
This concept is deceptively simple: consumers should be able to buy a set top box wherever they want and be able to use it wherever they want. However, these set top boxes and separate modules must have adequate security protection so that content is made available.
I understand that good progress has been made through the mutual efforts of the cable industry, their vendors and the consumer electronics industry. However, I will be watching this situation very carefully as we approach next summer to make sure that our deadline is met and that the envisioned consumer benefit of added choice are --in fact -- realized.
"Cable Ready" Receiver Designation
I have also been told that the cable and consumer electronic industries have resolved most of the technical issues associated with ensuring future compatibility between cable networks and consumer electronic equipment. That's the good news.
However, I also understand that there are two primarily non-technical -- or policy issues -- still to be resolved.
The first issue is what constitutes a "cable-ready" set in the era of digital television. Must a digital connector and copy protection circuitry be built into all integrated DTV sets that carry the "cable ready" label?
The cable industry argues that IEEE 1394/5C connector -- as it is fondly known in technical circles -- is necessary to ensure that consumer receivers are "forward compatible" or "future proof." That means that a cable-ready set, by definition, would have copy protection and be able to hook up with other digital devices, such as recorders or DVD players. The consumer electronics industry on the other hand argues that it should have the option of building receivers without the added complexity and expense of the digital connector.
The key is to have a simple to understand labeling system -- and consumer education -- to make sure the consumer truly knows what he or she is buying. What does the consumer expect? If it is cable ready in the digital era, it should have full cable functionality. Otherwise don't label it "open cable." With such labels and education, I believe we can leave it to the market to determine whether low-end sets with limited "forward compatibility" can succeed.
Again, the key is consumer choice and education.
Electronic Program Guides
The second issue involves the availability of the cable systems' proprietary electronic program guide information.
The cable industry's position is that the program information for cable channels is proprietary material for which you have had to pay and that it can only be made available to consumer's with the consent of the those who own the rights to the material.
The consumer electronic industry feels that it needs access to the information if it is to build competitive products. I am still trying to assess this issue in all of its dimensions. Let's bring a common sense-consumer perspective to this. Let's make it easy for viewers to get the information they want from the source they want so they can make the choices they expect. I urge the industries to work it out now.
We have made a lot of progress in bringing digital services to my hypothetical American family. But we still have a long way to go. Hollywood and the content community have a critical role to play in bringing high quality digital programming to the American consumer.
But will my American Family be able to see compelling content when it plugs in its newly acquired digital cable ready set? Or a blank screen?
Stay tuned. I'll be watching.